Here it is again. Save for Retirement Week.
You might recall, last year we were starting to look for a house to buy. Obviously, that didn't happen. Yet. And we're okay with that.
And here's why: a house is a place to live. It really isn't a very great investment. Sure you get to leverage other people's money (i.e. the bank) and there may be growth in your market, but there is a pretty big expense called interest. In addition, house prices average a much lower return than other investments. Not to mention property taxes, maintenance and improvements.
I recently heard that there is no economic advantage to owning a house. None. Zero. There is, however, a behavioral advantage. While owning a house does not necessarily make you richer, the act of paying down the mortgage so that at the end of 30 or 15 years you own an asset does. So, if you're a renter, but you don't want to end up like most, you need to make sure your behavior is like that of an owner.
When we've gone to look at homes, we've grabbed the disclosure forms and the financing information. You know the kind I mean, the ones that show how much the average electric bill, heating fuel, garbage, sewer, property taxes, etc. along with the monthly payment based on different downpayments and mortgages.
We've taken this information home, added a percentage for improvements and compared them to our current expenses. We are saving/investing the difference each month. Originally, we started doing this so that when we do buy a house our budget will shift easily to paying for all the expenses of homeownership. Now I know that this practice is actually protecting us from our renting selves as well.
Of course, I've got no source for where I heard the above economic information. So, take what you will from it. Just don't forget to Save for Retirement!